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The Victorian capital beat 139 other cities to top the Economist Intelligence Unit's Global Liveability Index.
Melbourne achieved perfect scores of 100 in the healthcare, education and infrastructure categories, as well as in the sub-category of sport.
It also performed well in the other criteria of stability, and culture and environment.
Four Australian cities made the top 10 list, which remains unchanged from last year.
But Melbourne was firmly ahead of Sydney, with the NSW capital coming in at seventh behind Adelaide, which was equal fifth with Calgary.
Perth was ninth and Auckland also made the list again as the world's 10th most liveable city.
The Austrian capital Vienna again came second to Melbourne with the Canadian city of Vancouver, which was the most liveable city until 2011, in third place.
The world's top 10 most liveable cities
1. Melbourne, Australia
2. Vienna, Austria
3. Vancouver, Canada
4. Toronto, Canada
5=. Adelaide, Australia
5=. Calgary, Canada
7. Sydney, Australia
8. Helsinki, Finland
9. Perth, Australia
10. Auckland, New Zealand.